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Invisalign was started by two MBA candidates at Stanford in 1999 with the premise that for some dental patients, retainers can shift your teeth just as good as traditional braces. For decades orthodontists had been realigning teeth with the large brackets cemented to a patients teeth and connected together with a metal wire. Invisalign introduced a completely different method of giving patients clear retainers every two weeks that were slightly different to slowly shift their teeth into position. The idea was enormously disruptive to the dental industry as invisalign\u2019s sales have now reached $761M in the $6.4B orthodontic market for braces. [1] & [1.5]<\/p>\n
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Business Model:<\/p>\n
Their business model hinges on the value proposition they provide to patients and orthodontists. Patients are willing to pay nearly double for invisalign product because of the aesthetic appeal of a clear retainer vs. the metal mouth look that accompanies traditional braces. For the orthodontists, invisalign offeres soft savings by reducing the labor time from 9-12 hours per treatment to 2-3 in turn allowing the orthodontist to increase their capacity and generate more revenues. [2]<\/p>\n
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Challenges:<\/p>\n
However, the dental industry is not one open to drastic change. Given the disruptive nature of the technology, many orthodontists were resist to trying it and even questioned its efficacy. Additionally, the process of designing and manufacturing each individualized product was extremely intense and costly. Developing an effective operating model that could make this technology economically viable and win over orthodontists was crucial to their success.<\/p>\n
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Design Process<\/p>\n
Invisalign focused on giving the orthodontist control over the treatment process. The orthodontist would do a 3D scan of the patient\u2019s teeth, and send it electronically to Invisalign\u2019s modeling facility where experts would digitally transform it into a customized simulation showing tooth movements in two week increments. Since each orthodontist prescribed unique treatments, invisalign gave the orthodontist the ability to submit feedback for revising the model, before actual production.<\/p>\n
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The intense nature of 3D modeling software made labor costs extremely high. However, all the work was done electronically enabling Invisalign to outsource this to any part of the world. The founder was originally from Pakistan, and thus successfully established a facility to handle this portion of the process there. This gave them greater control over costs.<\/p>\n
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Manufacturing:<\/p>\n
Each retainer produced needed to be custom<\/em>. Traditional manufacturing is incredible cheap for producing standard<\/em> units, but when products vary on a per unit basis, the expense becomes enormous. To avoid this manufacturing pitfall, Invisalign employed emerging 3D printing technology. By partnering with 3D systems, the premier innovator in 3D printing, invisalign was able to drastically reduce their manufacturing costs. [3] In fact, by 2012 \u201c17.2 million Invisalign braces were made. Each one of them was manufactured in a 3D printing, 24\/7, lights out manufacturing facility.\u201d [4] Furthermore, they established their production facility in Juarez, Mexico giving them a geographic advantage, a more business friendly regulatory environment, and greater control over costs.<\/p>\n <\/p>\n Sales:<\/p>\n Despite Invisalign\u2019s disruptive technology, strategic partnerships, and superior processes, the overwhelming challenge to overcome was convincing orthodontists to actually use the product. In the early days they made a significant marketing push for brand awareness and by the end of 2001 75% of orthodontists were trained on the company\u2019s system. [2] However, sales weren\u2019t growing fast enough. Rather than trying to convince traditional orthodontists, they decided to focus their sales force attention on getting current orthodontist to prescribe the invisalign product more. They developed different tiers for orthodontists based on their use of the product and then set incentives such that sales reps would devote more time to those orthodontists. A sales rep\u2019s commission was tied to the the number of cases started. They designed their call centers and websites to directly route interested customers to orthodontists using high volumes of the Invisalign product. [2]<\/p>\n <\/p>\n Conclusion:<\/p>\n Invisalign had a disruptive technology, but would not have been able to execute their business model without a well designed operating model. Their partnerships abroad, employment of outside 3D printing expertise, incorporation of the orthodontist\u2019s feedback into their workflow, and alignment of incentives for their sales force with the overall strategy gave them the foundation on which to build one of the most successful startups in the dental space.<\/p>\n <\/p>\n <\/p>\n <\/p>\n [1] Google Finance ALGN – https:\/\/www.google.com\/finance?q=NASDAQ%3AALGN&fstype=ii&ei=-MJZVuDFCNezmAHYoZ8Q<\/p>\n <\/p>\n [1.5] IBISWorld Industry Report OD6039 – Orthodontists in the US<\/p>\n <\/p>\n [2] Kellogg School of Management – Invisalign: Orthodontics Unwired<\/p>\n <\/p>\n